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Why are so many auto plants closing?

Manufacturers are using the momentum of a profound transformation in the sector to close or consolidated both unprofitable auto plants and as well as profitable operations with slim margins. A falling demand for private cars among younger consumers, with a trend towards new, less individual mobility solutions means car companies are rethinking their manufacturing models globally.

General Motors is an extreme example: the company has shut a plant in Australia, sold its operations in Europe, Russia and Africa, and will close four plants in the US and one in Canada this year at a cost of almost 6,000 jobs.

Honda has announced that it will close its factory in Swindon, UK, with the loss of 3,500 jobs, and discontinue production of the Civic in Gebze, Turkey, affecting 1,000 workers.

Jaguar Land Rover will cut 4,500 jobs globally, and Nissan cancelled plans to build its new SUV in the UK. Ford is reviewing its operations in Europe, and announced that it will close the São Bernardo plant in Brazil, with the loss of 3,000 jobs.

What is behind the turmoil? Local factors, such as Brexit in Britain, influence decisions, but this is a major global restructuring: the industry needs massive investment to shift to the next stage. We need to be part of part of the conversation about managing this change.

What are the key drivers of change?

Stagnant demand

Car ownership patterns and consumer habits are changing, and most analysts believe demand has peaked. Younger people are far less likely to see car ownership as necessary. Cars are primarily seen as a means of transport, and many people find car pooling or ride sharing apps like Uber to be more convenient. There is also a growth in cycling, the use of electric bikes, scooters and other forms of personal transportation.

Peak oil and climate change

There is a growing awareness of the need to transition from a carbon-based economy. Some governments have already announced petrol and diesel bans that will come into place in future. But replacements like electric vehicles, and the infrastructure needed to maintain them, are not yet ready for mass adoption.

Electrified vehicles

Everyone knows that electrified vehicles are the future, and most auto manufacturers are developing models. However, this is expensive and the models are not yet profitable, so development is speculative. Electric cars have fewer moving parts than those with internal combustion engines, and require fewer workers. IG Metall in Germany expects the loss of 160,000 jobs due to electrified vehicles.

Autonomous vehicles

There is a significant debate about how widespread autonomous vehicles will be in the future, but most manufacturers are adding autonomous features to cars. This requires a lot of expensive development. Google’s Waymo project is investing heavily in self-driving taxis.

New competitors

Car companies face competition not just from new manufacturers like Tesla, but also from Google, Uber and other tech companies who offer alternative solutions to personal transport. Increasingly, value is added to cars by technology, and the danger manufacturers face is that they will become merely hardware providers. To mitigate this, they need to spend a lot of money acquiring technological expertise and software.

Industry 4.0 and the future of work

Auto manufacture is already highly automated, with robots doing a significant amount of the work. A new generation of electric and autonomous vehicles will mean the design of new, completely integrated systems, covering every process along the supply chain. Highly skilled workers will still be needed for assembly and machine maintenance, but a lot of auxiliary jobs will be cut.

What are the solutions?

Without intervention, the auto plants of the future will employ far fewer workers than they do today. While the principles of managing change in industry are familiar, unions must do a lot of focused work to develop credible plans.

Work with companies now

IndustriALL has global framework agreements with a number of auto companies. These facilitate high level discussions about the future of the industry, and provide an opportunity to negotiate the transition to new forms of production.

Lobby government and local authorities

Unions must work with governments to develop sustainable industrial policy and not wait for companies to create jobs. Infrastructure, transport policy and urban planning are crucial. The way cities are designed has major implications for the future of transport.

Repurpose auto factories

With the challenges presented above unions need to prepare for the new world of work. The competence of highly skilled auto workers needs to be preserved and developed to cater for the needs of the future auto industry, but also, when closures are unavoidable, for the needs of new industries that will fill the void. This work will have to be done in cooperation with companies and local and national governments.

Ultimately, unions, companies, governments and urban planners will have to work together on large scale industrial redeployment projects.

Developing an action plan

Over the course of this year, IndustriALL will host a series of meetings designed to develop best practice from affiliates who have experience of these changes.

As well as a series of company-specific network meetings, an expert meeting on changes in the industry will be held this year. In December, this will culminate in an auto meeting where recommendations for dealing with changes in the sector will be discussed.


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